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Financial statements for Discovery Company follow: DISCOVERY COMPANY Statement of Financial Position As of 31 December 20X4 20X3 Assets Current assets: Cash $ 49,000 $ 42,700 Accounts receivable 1,364,100 1,307,600 Inventory 1,112,800 1,016,400 Total current assets Land Plant and equipment Less: Accumulated depreciation Patents 2,525,900 2,366,700 927,300 400,400 4,663,100 3,227,200 (2,376,200) (2,343,600) 246,400 259,000 Total assets $5,986,500 $ 3,909,700 Liabilities and shareholders' equity Liabilities: Current liabilities: Accounts payable Salaries and wages payable Income tax payable $ 768,200 $ 844,200 121,100 112,200 283,300 264,500 Total current liabilities Long-term debt 1,172,600 2,938,400 1,220,900 1,587,400 4,111,000 2,808,300 Total liabilities Shareholders' equity: Common shares, no-par Retained earnings 484,900 1,390,600 480,400 621,000 Total shareholders' equity 1,875,500 1,101,400 Total liabilities and shareholders' equity $5,986,500 $ 3,909,700 9,872,900 DISCOVERY COMPANY Statement of Comprehensive Income For the year ended 31 December 20X4 Sales revenue Less expenses: Cost of goods sold $5,446,100 Selling and administrative 1,454,200 expenses Depreciation and amortization 493,700 Rent expense 40,100 Miscellaneous expenses 379,800 7,813,900 Total expenses Other revenues and expenses: Interest expense Gain on sale of equipment Loss on debt retirement 92,400 (16,100) 29,600 105,900 Earnings before income tax Income tax expense 1,953,100 831,400 Net earnings and comprehensive income $ 1,121,700 Additional information: a. The company sold equipment that had an original cost of $778,700 and a net book value of $330,200. Other equipment was purchased for cash. Patent amortization was $10,500. b. Long-term debt with a face value of $1,050,000 was repaid during the year and other long-term debt was issued at a lower interest rate. c. The company issued shares for land during the period. Other common shares were retired (bought back and cancelled) at book value. d. Assume unexplained changes in accounts stem from logical transactions. 2. Prepare the SCF, using the direct method to present cash flows in the operating activities section. (Deductible amounts and Cash outflows should be indicated with minus sign.) DISCOVERY COMPANY Statement of Cash Flows For the year ended 31 December 20X4 Operating activities: Cash received from customers Cash paid to suppliers and employees Cash paid for interest Cash paid for income tax $ 0 Net cash flows from operations Investing activities: Sale of equipment Purchase of equipment Net cash flows used for investing 0 Financing activities: Common shares retired Long-term debt retired Long-term debt issued Cash dividends paid 0 Net cash flows from financing Net increase in cash Cash balance beginning of the year Cash balance end of the year $ 0